Privatisation is not the solution for Eskom

Privatisation is not the solution for Eskom

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There has been support for the privatisation of Eskom - unsurprisingly, from the private sector. Much of the support comes from the President as part of the solution to improve service delivery.

As a country, we should look to experiences abroad for guidance on whether to adopt this policy or not. In 1986, The UK adopted a privatisation model for energy.

The lessons learnt are essential for us to heed following the news of Pravin Gordhan's changes to the board. Many reasons have become apparent to reject privatisation from those with some experience with it.

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Here are four that I believe will swing the vote in favour of staying public:

1. Privatisation costs you more 

You pay more: as a taxpayer and directly when public services are privatised. 

In a privatised service, remember that profits must be paid to shareholders, not reinvested in better services for the people. 

There are the extra costs of creating and regulating an artificial market. 

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2. You can't hold private companies accountable 

If a private company runs a service, they are not democratically accountable. Citizens don't have a voice.

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3. Public services are natural monopolies ‍

Privatisation was introduced because of a belief in free markets and consumer choice. The first record of this was in Germany, by the National Socialists.

Public services are often what economists call 'natural monopolies'.

Private monopolies often become the worst of all worlds: you don't have consumer power because you can't go elsewhere. But you don't have the power as a citizen to make the service better through democratic accountability. 

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4. Private companies cherry-pick services 

Private companies often choose the profitable bits of service to make as much money as possible - putting their interests ahead of citizens who are meant to benefit from these services.

E.g. Bus companies will only run services in busy, urban areas.

Thus, rural communities lose out - unless the government steps in with a subsidy. It's more efficient to run public services in public ownership. Profits can be reinvested across the whole network as needed. 

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‍Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and Sheffield. In his article Prof Prem Sikka, : 'Why the privatisation of the UK energy market has been a disaster.' He lists the number of private company failures in the energy sector.

The thought of breaking the Eskom monopoly seems difficult to achieve, as informed by UK experience, where six companies control 77% of the UK household energy market. There is a litany of bankruptcies dotting the UK energy market landscape. Do we want the same, or should we be focusing our attention on trying to fix the leadership issues at Eskom? 

We don't need to look to far, take the failure of SAA. It was much publicised. 

Take a look at our thoughts on SAA from Tax Manager Pearl Silindile Phakathi here -> https://bit.ly/3CvrtTX

If privatisation was the answer, then why did Comair fail miserably? 

Privatisation is not the panacea for all ills and must be viewed with the necessary scepticism and informed by a lesson from other countries considered a warning. 

Access to energy is a human right. Energy is far too important a service to trust the private sector to take care of public services‍